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USDA, DoE, Navy kick starting biofuel development

Tuesday - 7/3/2012, 6:49pm EDT

By Esther Carey
Special to Federal News Radio

The government is providing financial backing for companies to invest in biofuels production research. Officials released a $30 million funding opportunity Friday as the first phase of a $100 million initiative to kick start the biofuels industry.

Agency senior executives said at a press conference Monday the grant program will help accomplish three objectives: progressing toward President Barack Obama's energy goals, protecting the energy security of the military and providing economic benefit to rural America.

Three departments, Energy, Navy and Agriculture, are involved in what USDA Secretary Tom Vilsack called a historic collaboration.
The three agencies are working together to address "all of the major challenges that a fledgling industry would have," Vilsack said.
He listed three: receiving the capital needed to research the new fuels, the assurance of having a buyer and a means of ensuring reasonable cost of the required materials.

In this situation, each agency is meeting one of those needs. The Energy Department will provide funding; the Navy agreed to become a major customer of the biofuels; and USDA will help maintain the cost-competitiveness of the final product.

Energy investments fuel innovation

DoE is making $32 million available for early-stage research of biofuels, in addition to the federal funding, said Heather Zichal, DoE's deputy assistant to the president for energy and climate change.

The money breaks down into two categories, Zichal said. The first provides $20 million for companies to develop test biorefineries for producing military-specification biofuels from biomass such as waste materials and algae. The second offers $12 million for up to eight projects researching the synthetic processing of biomass into transportation fuels.

"By pursuing new processes and technologies for producing next-generation biofuels, we are working to accelerate innovation in a critical and growing sector that will help to improve U.S. energy security and protect our air and water," said Energy Secretary Steven Chu in a press release.

Navy seeks energy independence

It is critical for the military to move toward alternative fuel sources, said Navy Secretary Ray Mabus, Secretary of the Navy, at the press conference.

"Energy security has to be at the top of our agenda, because right now we give countries that produce oil too much of an input on whether our ships sail, our aircraft fly, or our surface vehicles operate," said Mabus. "Diversity of the supply is key for energy independence."

The "recognized vulnerability" of the military's dependence on foreign oil and the growing cost of that fuel encouraged the Navy to partner with USDA and Energy on the biofuels program, Mabus said.

The program calls for companies to develop biofuels that meet military specifications and that can be used with the existing hardware and systems. A Navy ship already completed a successful test run on biofuels in November, and an F/A-18 flew on April 22 with a biofuel blend.

The Air Force also plans to use alternative fuels for half of its energy needs by 2016.

USDA and rural economics

The grant program could help revitalize rural areas of America, Vilsack said.

"It opens up great promise for the development of non-food feedstock as a potential cash crop for farmers, ranchers and producers throughout the United States," Vilsack said. "The refineries that will be converting the biomass ultimately into fuel will likely be located in rural areas, helping to create jobs."

USDA will use commodity credit corporation resources to buy down the cost of feedstocks, added Vilsack. This will help keep the cost of the end-result fuel competitive, he said.

Program details

Companies interested in taking part in the program must submit designs and business plans by August. The government will choose awardees and will begin negotiations around October. The second phase of the program involves $70 million to fund the construction of biorefineries. Companies are expected to match the funding they receive from the government, at least dollar-for-dollar.

The grant program announced Friday is only one part of a bigger plan. In August 2011, the three agencies sent out a request for information as the first step in the process of increasing production of biofuels. At that time, they identified $510 million which could eventually be put toward the project.
Authority for the utilization of federal funds through this effort comes from the Defense Production Act, which enables governmental financing of industries important to the military.